Japanese Yen Short-term Outlook: USD/JPY Breakout Stalls at 2024 High as Intervention Risk Builds

Japanese Yen Technical Forecast: USD/JPY Short-term Trade Levels

• USD/JPY has broken above the June opening range and extended its advance to yearly highs.
• The rally is now testing a major resistance hurdle at the 2024 highs with the weekly opening range intact just below- breakout to determine next move.
• A topside breach would signal continuation of the broader advance- bulls vulnerable while below.
• Intervention risk remains elevated as Japanese officials continue to warn against excessive currency volatility.
• Resistance 161.69/95 (key), 163.33, 164 - Support 160.37/74 (key), 159.27/29, 157.70/90

USD/JPY remains pinned just below a pivotal resistance zone after extending its rally from the May lows. Momentum continues to favor the bulls, with daily RSI pushing into overbought territory for the first time in months, but the advance has begun to stall as price tests a key technical barrier. With the weekly opening range taking shape beneath resistance and intervention risks lingering in the background, traders are looking for a breakout to provide the next directional cue. Battle lines drawn on the USD/JPY short-term technical charts.

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Japanese Yen Price Chart – USD/JPY Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Technical Outlook: In my last Japanese Yen Short-term Outlook, we noted USD/JPY was testing resistance at the yearly highs and that, “From a trading standpoint, losses would need to be limited to the monthly open IF price is heading higher on this stretch with a close above 160.74 needed to fuel the next major leg of the advance.” USD/JPY broke the June opening range high the following week with the rally extending nearly 1.5% off the monthly low. Daily RSI has now broken into overbought territory for the first time since November and keeps the momentum profile in favor of the bulls, for now.

The rally has stalled into the next major technical hurdle at the 2024 high-day close (HDC) / high at 161.69/95. The immediate focus is on a reaction off this threshold with the weekly opening range taking shape just below. Looking for the breakout for guidance here with the bulls vulnerable below his pivot zone.

Japanese Yen Price Chart – USD/JPY 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Notes: A closer look at Japanese Yen price action shows USD/JPY continuing to trade within the confines of the ascending pitchfork we have been tracking off the May low. Price has been in consolidation just above the median line and the focus is on a breakout of Monday’s range. Key near-term support rests back at the 61.8% extension of the January advance and the 2024 high-week close (HWC) at 160.37/74- note that the lower parallel converges on this threshold into the close of the month and a break / close below this slope would be needed to suggest a more significant high is in place and invalidate the May uptrend. Subsequent support rests with the monthly open and the 38.2% retracement of the May rally at 159.27/29 and 157.70/90- a region defined by the 61.8% retracement, the 2025 high-day close, and the November high. Look for a larger reaction there IF reached.

A topside breach / daily close above this key pivot zone is needed to mark uptrend resumption with subsequent resistance objectives eyed at the 1.618% extension of the 2025 advance at 163.33 and the 1.618% extension of the yearly opening-range at 164. Both levels of interest for possible topside exhaustion / price inflection IF reached.

 

Bottom line: USD/JPY is trading within a tight, well-defined, weekly opening range – just below resistance. Look for the breakout to offer guidance here in the days ahead. From a trading standpoint, losses would need to be limited to 160.37 IF price is heading higher on this stretch with a close above 162 needed to fuel the next major leg of the advance.

Keep in mind the intervention threat remains extremely high with Japanese officials citing they are ready to respond at any time to rapid moves in the yen. That said, retail traders remain heavily positioned on the short side of the USD/JPY, and a break higher could trigger stops and cascade into an even larger move. Use caution here.

USD/JPY Trader Sentiment

Source: FOREX.com

Attention now turns to Thursday's U.S. Personal Consumption Expenditures (PCE) report, the Federal Reserve's preferred gauge of inflation. After Chair Warsh recently reaffirmed the Fed's commitment to restoring inflation to its 2% target, the release could prove pivotal in shaping expectations for the policy path ahead. A stronger-than-expected reading would likely reinforce the case for further policy tightening, while softer data could temper rate-hike expectations and cap the USD advance. Fed Fund Futures are currently pricing a 70% probability of a 25-basis-point rate increase at the September FOMC meeting. Stay nimble into the releases and watch the weekly closes here for guidance. Review my latest Japanese Yen Weekly Forecast for a closer look at the longer-term USD/JPY technical trade levels.

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--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex